Market Will Judge New ETFs

Does the typical do-it-yourself investor need an ETF that tracks the price of lean hogs? Not likely.

It is very unlikely that you need most of the new ETFs, but that they exist is not a strike against them. It is not a stretch to say that a commodity ETF besides one that owns a precious metal could have a place in a diversified portfolio.

If there will be any demand for these exotic-sounding ETFs, it probably will come from institutional investors -- the managers of the mutual funds you own in your 401k.

ETFs Don't Take Risks, People Do

Anytime ETFs that invest in something different come out, they will get slammed in much the same way. The backward thinkers will say that the new funds take too much risk, investors will chase hot returns, individuals should stay away.

Taking too much risk, chasing hot returns -- haven't investors been doing that already with OEFs and stocks? Shuttering the ETF industry will not deter people who want to speculate from speculating.

It is a certainty that some investors will misuse ETFs in spectacular fashion, but this is a flaw in human behavior, not investment products.

ETFs are merely tools. In some instances they are the best way to access certain markets; many times they are not the best tools out there. I believe they give do-it-yourself investors the chance to get the same results as stocks but with less risk, which is why I write about them.